IDEAS home Printed from https://ideas.repec.org/a/bla/ausact/v32y2022i1p124-140.html
   My bibliography  Save this article

Exploring the Relationship between Target Costing Functionality and Product Innovation: The Role of Information Systems

Author

Listed:
  • Odysseas Pavlatos
  • Hara Kostakis

Abstract

The role of management control practices in product innovation is a subject that has received great attention in management control literature. This research explores the relationship between target costing (TC) functionality, the quality of information systems (IS) and product innovation. We conducted an empirical study in 108 large industrial enterprises, which have research and development departments. The results show that there is a positive relationship between TC functionality and product innovation in terms of product newness and innovation rate. A direct effect of the quality of IS information on product innovation was not established but rather it was found that the positive association between the functionality of TC and product innovation is stronger in firms that provide IS information of higher quality as compared to firms that provide IS information of lower quality.

Suggested Citation

  • Odysseas Pavlatos & Hara Kostakis, 2022. "Exploring the Relationship between Target Costing Functionality and Product Innovation: The Role of Information Systems," Australian Accounting Review, CPA Australia, vol. 32(1), pages 124-140, March.
    • Handle: RePEc:bla:ausact:v:32:y:2022:i:1:p:124-140
    DOI: 10.1111/auar.12349
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/auar.12349
    Download Restriction: no
    File URL: https://libkey.io/10.1111/auar.12349?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Dunk, Alan S., 2007. "Innovation budget pressure, quality of IS information, and departmental performance," The British Accounting Review, Elsevier, vol. 39(2), pages 115-124.
    2. Adler, Paul S. & Chen, Clara Xiaoling, 2011. "Combining creativity and control: Understanding individual motivation in large-scale collaborative creativity," Accounting, Organizations and Society, Elsevier, vol. 36(2), pages 63-85, February.
    3. repec:pup:chapts:9889-01 is not listed on IDEAS
    4. Davila, Tony, 2005. "An exploratory study on the emergence of management control systems: formalizing human resources in small growing firms," Accounting, Organizations and Society, Elsevier, vol. 30(3), pages 223-248, April.
    5. John Hulland, 1999. "Use of partial least squares (PLS) in strategic management research: a review of four recent studies," Strategic Management Journal, Wiley Blackwell, vol. 20(2), pages 195-204, February.
    6. Pavlatos, Odysseas & Kostakis, Hara, 2018. "Management accounting innovations in a time of economic crisis," The Journal of Economic Asymmetries, Elsevier, vol. 18(C), pages 1-1.
    7. Ibusuki, Ugo & Kaminski, Paulo Carlos, 2007. "Product development process with focus on value engineering and target-costing: A case study in an automotive company," International Journal of Production Economics, Elsevier, vol. 105(2), pages 459-474, February.
    8. Roychowdhury, Sugata, 2006. "Earnings management through real activities manipulation," Journal of Accounting and Economics, Elsevier, vol. 42(3), pages 335-370, December.
    9. Ax, Christian & Greve, Jan & Nilsson, Ulf, 2008. "The impact of competition and uncertainty on the adoption of target costing," International Journal of Production Economics, Elsevier, vol. 115(1), pages 92-103, September.
    10. Gordon, Lawrence A. & Narayanan, V. K., 1984. "Management accounting systems, perceived environmental uncertainty and organization structure: An empirical investigation," Accounting, Organizations and Society, Elsevier, vol. 9(1), pages 33-47, January.
    11. Schick, Allen G. & Gordon, Lawrence A. & Haka, Susan, 1990. "Information overload: A temporal approach," Accounting, Organizations and Society, Elsevier, vol. 15(3), pages 199-220.
    12. Kathleen M. Eisenhardt & Jeffrey A. Martin, 2000. "Dynamic capabilities: what are they?," Strategic Management Journal, Wiley Blackwell, vol. 21(10‐11), pages 1105-1121, October.
    13. Moores, Ken & Yuen, Susana, 2001. "Management accounting systems and organizational configuration: a life-cycle perspective," Accounting, Organizations and Society, Elsevier, vol. 26(4-5), pages 351-389.
    14. Michele Kremen Bolton, 1993. "Organizational Innovation and Substandard Performance: When is Necessity the Mother of Innovation?," Organization Science, INFORMS, vol. 4(1), pages 57-75, February.
    15. Filomena, Tiago Pascoal & Neto, Francisco Jos Kliemann & Duffey, Michael Robert, 2009. "Target costing operationalization during product development: Model and application," International Journal of Production Economics, Elsevier, vol. 118(2), pages 398-409, April.
    16. Lars Schweizer & Shalini Rogbeer & Björn Michaelis, 2015. "The dynamic capabilities perspective: from fragments to meta-theory," Management Research Review, Emerald Group Publishing Limited, vol. 38(7), pages 662-684, July.
    17. Henri, Jean-Francois, 2006. "Management control systems and strategy: A resource-based perspective," Accounting, Organizations and Society, Elsevier, vol. 31(6), pages 529-558, August.
    18. Stock, Ruth & Six, Björn & Zacharias, Nicolas, 2013. "Linking Multiple Layers of Innovation-oriented Corporate Culture, Product Program Innovativeness, and Business Performance: A Contingency Approach," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 61665, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    19. Maiga, Adam S. & Nilsson, Anders & Jacobs, Fred A., 2014. "Assessing the interaction effect of cost control systems and information technology integration on manufacturing plant financial performance," The British Accounting Review, Elsevier, vol. 46(1), pages 77-90.
    20. Stock, Ruth & Six, Björn & Zacharias, Nicolas, 2013. "Linking Multiple Layers of Innovation-oriented Corporate Culture, Product Program Innovativeness, and Business Performance: A Contingency Approach," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 63409, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    21. Howard O. Rockness & Michael D. Shields, 1988. "An empirical analysis of the expenditure budget in research and development," Contemporary Accounting Research, John Wiley & Sons, vol. 4(2), pages 568-581, March.
    22. Eva Labro, 2004. "The Cost Effects of Component Commonality: A Literature Review Through a Management-Accounting Lens," Manufacturing & Service Operations Management, INFORMS, vol. 6(4), pages 358-367, June.
    23. Jesse F. Dillard, 2000. "Integrating the Accountant and the Information Systems Development Process," Accounting Forum, Taylor & Francis Journals, vol. 24(4), pages 407-421, December.
    24. Kee, Robert, 2010. "The sufficiency of target costing for evaluating production-related decisions," International Journal of Production Economics, Elsevier, vol. 126(2), pages 204-211, August.
    25. David Naranjo-Gil & Victor Maas & Frank Hartmann, 2009. "How CFOs Determine Management Accounting Innovation: An Examination of Direct and Indirect Effects," European Accounting Review, Taylor & Francis Journals, vol. 18(4), pages 667-695.
    26. Iranmanesh, Hossein & Thomson, Vince, 2008. "Competitive advantage by adjusting design characteristics to satisfy cost targets," International Journal of Production Economics, Elsevier, vol. 115(1), pages 64-71, September.
    27. Henri, Jean-François & Wouters, Marc, 2020. "Interdependence of management control practices for product innovation: The influence of environmental unpredictability," Accounting, Organizations and Society, Elsevier, vol. 86(C).
    28. Dekker, Henri & Smidt, Peter, 2003. "A survey of the adoption and use of target costing in Dutch firms," International Journal of Production Economics, Elsevier, vol. 84(3), pages 293-305, June.
    29. Davila, Antonio & Foster, George & Li, Mu, 2009. "Reasons for management control systems adoption: Insights from product development systems choice by early-stage entrepreneurial companies," Accounting, Organizations and Society, Elsevier, vol. 34(3-4), pages 322-347, April.
    30. Bing Guo & Evita Paraskevopoulou & Luis Santamaría Sánchez, 2019. "Disentangling the Role of Management Control Systems for Product and Process Innovation in Different Contexts," European Accounting Review, Taylor & Francis Journals, vol. 28(4), pages 681-712, August.
    31. Chenhall, Robert H., 2005. "Integrative strategic performance measurement systems, strategic alignment of manufacturing, learning and strategic outcomes: an exploratory study," Accounting, Organizations and Society, Elsevier, vol. 30(5), pages 395-422, July.
    32. Dunk, Alan S., 2011. "Product innovation, budgetary control, and the financial performance of firms," The British Accounting Review, Elsevier, vol. 43(2), pages 102-111.
    33. Bisbe, Josep & Otley, David, 2004. "The effects of the interactive use of management control systems on product innovation," Accounting, Organizations and Society, Elsevier, vol. 29(8), pages 709-737, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yan, Kai & Zhang, Ziyi & Yang, Lisi & Cao, Yuqiang & Shan, Yaowen, 2024. "Capital generates green: Evidence from China's national innovation system policy," International Review of Financial Analysis, Elsevier, vol. 91(C).
    2. Yaowen Shan & Sue Wright, 2022. "Editorial," Australian Accounting Review, CPA Australia, vol. 32(1), pages 3-4, March.
    3. Liu, Lihua & Cao, Lele & Cao, Yuqiang & Lu, Meiting & Shan, Yaowen, 2024. "VAT credit refunds and firm productivity: Evidence from China's VAT reform," International Review of Financial Analysis, Elsevier, vol. 93(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Henri, Jean-François & Wouters, Marc, 2020. "Interdependence of management control practices for product innovation: The influence of environmental unpredictability," Accounting, Organizations and Society, Elsevier, vol. 86(C).
    2. Stadtherr, Frank & Wouters, Marc, 2021. "Extending target costing to include targets for R&D costs and production investments for a modular product portfolio—A case study," International Journal of Production Economics, Elsevier, vol. 231(C).
    3. Ellen Haustein & Robert Luther & Peter Schuster, 2014. "Management control systems in innovation companies: a literature based framework," Metrika: International Journal for Theoretical and Applied Statistics, Springer, vol. 24(4), pages 343-382, February.
    4. Chen, Clara Xiaoling & Lill, Jeremy B. & Lucianetti, Lorenzo, 2023. "Performance measurement system diversity and product innovation: Evidence from longitudinal survey data," Accounting, Organizations and Society, Elsevier, vol. 111(C).
    5. Chenhall, Robert H. & Moers, Frank, 2015. "The role of innovation in the evolution of management accounting and its integration into management control," Accounting, Organizations and Society, Elsevier, vol. 47(C), pages 1-13.
    6. Yazdifar, Hassan & Askarany, Davood, 2012. "A comparative study of the adoption and implementation of target costing in the UK, Australia and New Zealand," International Journal of Production Economics, Elsevier, vol. 135(1), pages 382-392.
    7. Müller-Stewens, Benedikt & Widener, Sally K. & Möller, Klaus & Steinmann, Jan-Christoph, 2020. "The role of diagnostic and interactive control uses in innovation," Accounting, Organizations and Society, Elsevier, vol. 80(C).
    8. Gomez-Conde, Jacobo & Lopez-Valeiras, Ernesto & Ripoll-Feliú, Vicente M. & Gonzalez-Sanchez, María Beatriz, 2013. "El efecto mediador y moderador de la internacionalización en la relación entre los sistemas de control de gestión y el compromiso con la innovación," Revista de Contabilidad - Spanish Accounting Review, Elsevier, vol. 16(1), pages 53-65.
    9. Grafton, Jennifer & Lillis, Anne M. & Widener, Sally K., 2010. "The role of performance measurement and evaluation in building organizational capabilities and performance," Accounting, Organizations and Society, Elsevier, vol. 35(7), pages 689-706, October.
    10. Bedford, David S. & Malmi, Teemu & Sandelin, Mikko, 2016. "Management control effectiveness and strategy: An empirical analysis of packages and systems," Accounting, Organizations and Society, Elsevier, vol. 51(C), pages 12-28.
    11. Peters, Matt D. & Wieder, Bernhard & Sutton, Steve G., 2018. "Organizational improvisation and the reduced usefulness of performance measurement BI functionalities," International Journal of Accounting Information Systems, Elsevier, vol. 29(C), pages 1-15.
    12. Simone Aresu & Luigi Rombi & Andrea Cardia, 2019. "Management accounting systems in venture capital-backed start-up companies," MANAGEMENT CONTROL, FrancoAngeli Editore, vol. 2019(3), pages 35-58.
    13. Christina Boedker & Kar Ming Chong, 2022. "The mediating role of accounting controls between supervisors' empowering leadership style and subordinates' creativity and goal productivity," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(4), pages 4587-4614, December.
    14. Chen, Yen-Chun & Lin, Ya-Hui & Li, Po-Chien & Chen, Chung-Jen, 2022. "Understanding the interplay between competitor and alliance orientations in product innovativeness: An integrative framework," Technological Forecasting and Social Change, Elsevier, vol. 175(C).
    15. Widener, Sally K., 2007. "An empirical analysis of the levers of control framework," Accounting, Organizations and Society, Elsevier, vol. 32(7-8), pages 757-788.
    16. Hall, Matthew, 2011. "Do comprehensive performance measurement systems help or hinder managers' mental model development?," LSE Research Online Documents on Economics 36703, London School of Economics and Political Science, LSE Library.
    17. Xiangfei Zeng & Ning Zhang & Lianghua Chen & Wenpei Zhang, 2023. "The Impact of Interactive Control in Budget Management on Innovation Performance of Enterprises: From the Perspective of Manager Role Stress," IJERPH, MDPI, vol. 20(3), pages 1-21, January.
    18. Erkki K. Laitinen & Aapo Länsiluoto & Soila Salonen, 2016. "Interactive budgeting, product innovation, and firm performance: empirical evidence from Finnish firms," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 27(4), pages 293-322, November.
    19. Naranjo-Gil, David & Hartmann, Frank, 2007. "Management accounting systems, top management team heterogeneity and strategic change," Accounting, Organizations and Society, Elsevier, vol. 32(7-8), pages 735-756.
    20. Ernesto Lopez-Valeiras & Jacobo Gomez-Conde & David Naranjo-Gil, 2015. "Sustainable Innovation, Management Accounting and Control Systems, and International Performance," Sustainability, MDPI, vol. 7(3), pages 1-14, March.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:ausact:v:32:y:2022:i:1:p:124-140. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=1035-6908 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.